Winning and Losing Airports in the Washington/National Slot Shuffle

Washington’s National Airport is, to put it mildly, a highly desirable place to fly. It is mere minutes from downtown Washington and is the preferred airport for many a businessperson and politician. It is also slot-restricted, so rarely do airlines have the opportunity to improve their standing. Recently, however, there was a big change. Now we know which destinations will be happy and which will be crying.

The reason for the big shift was the American/US Airways merger. US Airways already had the most slots at the airport, and the US Department of Justice (DOJ) decided that it didn’t want to allow US Airways to combine with American and become even stronger there. To right this “wrong,” DOJ forced the airlines to sell off 52 slot pairs (one pair = one departure and one arrival per day) to new entrants. JetBlue already leased 8 of those and would get them permanently, so the net result was that 44 slot pairs would change hands.

For American and US Airways, that meant cutting flights in order to fit under the new cap. The new airline announced it would cut 17 cities from its nonstop network at National (though one, San Diego, was cut in favor of adding a second LAX flight, so I don’t count that one). On the flip side, Southwest won 27 slots, JetBlue picked up 12 (in addition to the 8 it already leased), and Virgin America scooped up 4. The last one is a Sunday-only slot pair that Southwest didn’t want and is still unassigned, I believe.

I had assumed that a lot of places would be unhappy with all this. After all, the new American would end up cutting flights to smaller cities while the new low cost carriers would just add to big cities that already had a ton of service. Now that Southwest has unveiled its plans and JetBlue has told us half its story, I have to say it’s not nearly as bad as I thought. Here are the winners and losers.

Let’s start with those airports that are going to be downright pissed. All of the above airports will lose their only nonstop flight to Washington/National. Most of these saw only one daily flight (except Saturday), though Islip, Savannah, and Wilmington each had two. Little Rock can take some solace in knowing that American is starting a nonstop flight to New York/LaGuardia so even though one door is closing, a new one is opening up. The rest of these are just small cities, often with big military ties that helped keep those airplanes profitable. There was little chance that anyone else would step into these markets.

Each of these four markets will lose American/US Airways nonstop service to National entirely, but they still have nonstop flights on at least one other airline (in parentheses). Will Detroit and Minneapolis really be devastated? Probably not. Omaha will now have only a single flight on Delta, but it’s also not a huge loss there. But Montreal had 2 daily flights on US Airways and will now have only two remaining on Air Canada. The Air Canada schedule won’t permit day trips to DC anymore, so that’s a loss. None of the new entrants are putting airplanes here, so this is a net negative for all, even if it’s not a huge one.

One little market won the lottery, and that’s Nassau in the Bahamas. Nassau is losing its US Airways flight, but JetBlue announced it will add a flight of its own in the market with its new slot windfall. JetBlue will add more seats than US Airways pulls out and it will likely do so at a lower fare. The only people sad about this are US Airways frequent fliers and those who like to fly First Class. Overall, I’d say this is a slight positive at worst for Nassau but probably better than that.

There are a couple of markets that won’t see the players change at all but they will get more flights from Southwest. Both Houston and St Louis already have 2 daily flights on Southwest and they’ll get more. We don’t know the numbers yet, but that will be announced in May. Either way, it’s still an improvement since they lose nothing from any other airline as of now.

The biggest grouping on the positive side are those cities that will now gain a new nonstop competitor. All of these cities have American/US Airways nonstop service today and will now get some good competition. Akron/Canton will take its 1 US Airways flight today and add Southwest service. (We don’t know how many flights until May.) The same goes for Indianapolis where US Airways has a much larger presence with 6 a day. Nashville may have lost US Airways and American competing head-to-head but now Southwest will bring 3 daily into the market to compete with the 6 at the new American. New Orleans will get 2 from Southwest and Charleston will get 2 from JetBlue to go up against American’s 5 in each. Hartford will also get 2 from JetBlue to compete against American’s 6. Tampa is the big winner. It goes from 1 to 2 daily on JetBlue and it will also get 2 new nonstops from Southwest. American keeps 5. These guys should all be happy.

Love may end up getting even luckier if Virgin America wins its battle for gates at the airport. If it wins, then Virgin will start four daily flights to National from Love. If it fails, then Virgin will have to look elsewhere to determine how to use its 4 slots. And these slots can’t go to hubs in San Francisco and LA because of the perimeter rule.

JetBlue still has 6 slots that it hasn’t allocated yet, but I bet those go to existing Florida markets. The smart plan is to announce the cities that get new nonstop service first – makes a bigger splash. But maybe I’ll be surprised here as well. So far, I’ll certainly admit that more mid-size cities are getting service than I expected. But the small cities are once again left out in the cold.

Quite a move to Midway, albeit predictable. 9 dailies against the 12 United & 7 American. Obviously going for the business traveler, and to an extent competing with itself at Dulles. Will be interesting to see how these connect into the international flights. Even with Baltimore up the road, many would rather fly and connect from DCA instead.

I think it’s because AUS didn’t get any new service as a result of AA slot divestiture at DCA. He’s only looking at what changed (what service is stopping and what service is starting) as a result of this.

That is how Austin got the new service. When Southwest got more slots at DCA they chose Austin as one of the new services to DCA. Before that Southwest flew entirely to BWI. Southwest even ran a contest to see which city wanted the new routes to DCA. Maybe I’m missing something…

The VX slot award is a head-scratcher to me. The entire proposal is contingent on getting gates at DAL. IMHO they are likely to get them, but it is not a done deal. I thought perhaps opening a BNA operation would be a good Plan B because they could tap entertainment traffic to LAX and tech to SFO. Apparently WN thought the same thing and now the market will be saturated with their new additions. Plan C would be ORD but c’mon ….there is no way to compete 28 dailies on incumbents (large FF base) with their measly four. Plus I am not sure how many Washingtonians are willing to cool their heals at ORD when they have n/s options to LAX.

I am glad they won them but wish them luck on making them work profitably.

I agree completely. Plus they can’t just start flying to LAX or SFO, they would have to get perimeter exemptions, eight of which were doled out a few years ago (including to VX) making it very unlikely more would be granted any time soon.

I think the additional losers will be those folks around DAL who liked the frequent flights to intra-Texas and the Wright Amenemdment region flights. I don’t see how WN can maintain frequencies to places like LUB, MAF, ABQ, etc. WN has been chomping at the bit to ditch Wright and start gobbling up Dallas business travel with Love Field being so much closer to downtown Dallas and the IH-35E corridor to the northern metroplex ‘burbs. If I was a betting man, I’d bet WN will start to stretch its legs out of DAL in the post-Wright era and start going for more business traffic from domestic airport further afield. And now WN is actively campaigning for two MORE gates at DAL while VX is just looking to get its foot in the door there. Seriously? WN already has over half of the DAL gates. I’m hoping VX wins that one – WN will need some DCA-DAL competition to keep those fares reasonable. Spirit ditched DCA for BWI some time ago, but with Spirit’s rapid growth at DFW, I thought they might try to get back in the game at DCA. But DCA is a tough airport for a LCC, and would be even tougher for a ULCC like Spirit I suppose.

David SF – I disagree. The cities that lost service were making money (at least most of them, I believe) but when you have finite capacity, you have to pick and choose the winners. Those cities that lost service just didn’t make as much as others but that certainly doesn’t mean they couldn’t support profitable service.

It may be nothing more than coincidence (then, again, it may not) that the net number of slot pairs American is divesting at Washington National (44) is very close to the number (42) US Airways received from Delta in their “slot swap.”

It also seems American is happy with the $381 million it’s receiving from the sales at DCA. American is also getting 24 slots (12 pairs, I believe) at JFK from jetBlue.

The DOJ has estimated the total value of the slot transactions at around $425 million. Not a bad haul.

DTW/MSP – DCA serve to connect DCA with the wider midwest/west DL network. Of course there is plenty of local demand that DL now has the nonstop monopoly on. But thinking of things like DSM-DTW-DCA there’s still plenty of competition over other hubs.

Interesting that other than Islip, all the markets losing all service are in the South. Maybe US feels that funneling them through CLT is good enough? I would think US would like to maintain its loyalty in North Carolina, but maybe there just isn’t traffic. Also LIT shouldn’t be complaining as they still have WN to BWI. DL is extremely strong in a lot of these midsize South markets (they even fly mainline ATL-AGS)

It seems to me that a lot of the losses affect business routes while many of the gains are to leisure destinations. That seems counterproductive, since business travellers need the proximity to the city more. Families heading to Disney for the week should be the ones driving out to IAD and BWI.

Frankly, I’m also surprised no Canadian airlines got extra slots at DCA, particularly with the cuts to Montreal. You’d think YYZ/YUL/YOW would be routes with heavy business and government travel.

One thing I don’t like about these slot reallocations is that some small cities lose service, while other larger cities get way too much service. Is there enough traffic for 26 plane loads of people to from Chicago to DCA? It seems like overkill to me.

There may not be enough traffic for 26 planeloads CHI-DCA, but UA/AA/WN operate their largest or second largest hub in Chicago and funnel more people to DCA than could ever imaginably be served nonstop to any Washington area airport.

Hubs exist for a reason, to sustain flights that without feed would never exist or exist with dramatically less frequency. So while in the route view it may seem that small cities are suffering, the overall network picture means these cities are well served. Take Jacksonville, NC from above. OAJ-DCA 1x daily is being cut, but OAJ-CLT is 8 daily on US/AA and OAJ-ATL is 3 daily on DL. Plenty of access to worldwide service there.

Big cities are big cause there’s a lot of population. So more big city service is serving a greater percent of the population. Whether that is better than nonstop service to small cities is subject to debate and personal opinion.

Don’t forget, we’ve been “missing” 5 daily one class 757s to MDW since ATA disappeared, probably about 1,000 seats given the way ATA packed em stacked em and racked em in those old 75s. In my experience, it didn’t seem like AA or UA added any service after that and I have actually noticed smaller aircraft on the ORD runs from those two more recently than even just a few years ago. Also, as others have noted, MDW is a hub for WN (whether they want to admit it or not) so pxs will be connecting over MDW on those WN flights just as they do over ORD for AA and UA. WN also needed to have extensive service so they had the schedule to compete with AA and UA O&D pxs as well.

Not counting San Diego as losing, because an additional flight is being added to LA, is comparable to equating landing in DCA to landing in Richmond, Virginia. It is over two hours away, without traffic, and when does LA ever not have traffic? US Airways direct flight between SAN and DCA was always full.

Crabby in San Diego – You misunderstand. I don’t count San Diego because that wasn’t a slot that American had to sell off. Yes, it decided to move the slot to LA, but that had nothing to do with a reduction in slots. That was simply a commercial decision.

I thought US won that perimeter exemption (not slot) specifically by offering service to SAN. I was surprised they could unilaterally take that exemption and change it to a different city. That would be akin to Alaska winning an exemption by offering service to Portland then saying a year later, no thanks, we’re going to add another DCA to LAX instead. Basically this seems to eradicate the purpose of the beauty contest that was held when it was decided where to award these additional perimeter exemptions.

The slot used by US for SAN was part of an out-of-perimeter exemption award given to every legacy airline. Each legacy could add one out-of-perimeter flight if it dropped a flight to an inside-the-perimeter hub. US/AA is free to use this slot anywhere except their inside-the-perimeter hubs. I believe Delta added SLC as part of this, for example.

The last set of beyond perimeter slots that were granted to the large, incumbent carriers at DCA aren’t tied to a specific route. But the carriers had to surrender a within perimeter slot to offer their new services.

How many years has it been since WN rigged the ATA bankruptcy proceedings to basically fold them and take all their spots at MDW? Regardless, that is the last time that I could fly DCA to MDW. Oh happy day!!!!!!!!!!!!!!!!!!!!!!

Overall, I think this worked out great for us DC folks. A few random thoughts from a frequent user of DCA…

– Most, if not all, of the cities losing nonstop service were added as a result of the DL/US slot swap so their service was short-lived.

– Several of these cities were to smaller airports that normally only have service to the closest hubs such as the three in NC, myrtle beach, augusta (typo alert in your graphic above), and the three in FL (VPS, PNS, TLH). Extensive connection opportunities over CLT and ATL exist and are often more convenient and better priced for more travelers anyway. I just booked DCA-TLH roundtrip over ATL because the US daily nonstop was inconveniently timed (not to mention $200 more expensive).

– LIT is the largest market losing service but it does have DCA service available via MEM (2 hours east) and XNA (3 hours northwest).

– I’m sure DL won’t take advantage of their new monopolies to DTW and MSP. Yes, that is a joke. However, new competition to seven destinations is still better than losing competition to four. Especially to frequent travel destinations such as BDL, MSY, BNA and TPA.

– Even as a USAA frequent flyer, trading AA for B6 to NAS is a gain in my book!

– WN service to CAK jumped off the page and smacked me in the face. And I’m a native of NE Ohio, very familiar with how well FL has done at CAK, I knew that US already had service to CAK and I still found this stunning. In fact, I expected to see CAK on the “cut entirely” list. Shocking, especially since WN usually will have multiple frequencies. Shocking even at 2x day on a 737, actually.

– NATIONAL TO MIDWAY LIVES!!!!!!!!!!!!!!!!!!!!!!!!!!! This should have been WN’s first service from DCA but I’ll try not to hold a grudge.

– I join everybody else in being questionable about VX. If they do not get DAL gates, I don’t know what else they could even do at DCA within their current route structure. They would need new perimeter exemptions to fly to LAX or SFO and they already received some in the last round. Since those were the first new DCA perimeter exemptions in eons, I wouldn’t be optimistic about more materializing any time soon.

For the cities losing service, the real bad guy is a system that with one hand slot controls an airport, and with the other allows carriers to dilute those slots (from a local O&D perspective) with RJs and connecting passengers. At EWR it doesn’t really bother us, but at LGA and DCA it’s an altogether different matter.

If you have to slot control LGA and DCA, by definition they aren’t deregulated. If they’re regulated (to whatever degree), we believe the goal of slots should be to provide access for as many O&D passengers as possible. That means RJs and connecting operations each should, at the very least, be limited to that number consistent with the goal. The hub, in particular, insulates AA/US at DCA, and DL at LGA, from the effects of oversubscribing to capacity in order to keep competitors out (not that they do that, of course – but they could) (does sarcasm come through on blog comments? Anyway…). What are those numbers? We don’t know, but will say two things about them: (1) they’re almost certainly lower than the current set-up; and (2) it’s the kind of issue that deserves a public policy debate.

Disallow the LGA and DCA hubs and limit RJs at them as a condition of mergers (too late this time, we know, but there will always be a next time) or via some other mechanism (magic wands, perhaps?), and the operations would have to succeed on pure local O&D traffic. Perhaps the incumbent, formerly-hubbing carriers would retain and use all their slots, but they’d bear the full cost of that business decision. Whatever they did, then, and only then, would we see a pubic benefit in the form of lower fares, more nonstop destinations, or both – what DOJ said it wanted at DCA but obviously did not produce. It would also benefit nearby airports (e.g., BWI and EWR) whose hub carriers would now have stiffer competition for O&D passengers.

It’s probably a pipe dream we know – a messy, politics-laden pipe dream – but if it could be done, we think it should be done. Flame away…

Edward – I do disagree with you here. The RJs provide a lot of value in DC. Now, if you put 20 a day like US Airways did between Philly and LaGuardia, then that seems like squatting to me. But when you have one a day to these small cities, it provides them with a huge lifeline. It makes day trips for business possible, and it provides better political ties to the nation’s capital. I can’t imagine US Airways is flying to, say, Augusta simply because it wants to squat on slots and prevent competition. There is enough, albeit limited amount, of demand to make it work. That’s fairly unique to Washington since political/military traffic can buoy service in cities that wouldn’t support it otherwise.

Of course, connecting traffic is part of that. Are there 50 people a day flying from Jacksonville, NC to DC? No. But there are enough people connecting to make that nonstop possible for those who really need that service. That’s the value of any hub. It makes providing service for those who aren’t connecting much more robust.

If you ban RJs and connecting, then you end up with a bunch of airplanes going to big cities. You get 9 a day on Southwest to Chicago, or you get both Southwest and JetBlue adding in Tampa. Now, for some people, that’s valuable. But for many people that are leisure travelers, it just makes it a little more convenient than schlepping out to Dulles or Baltimore.

So you take away an RJ in Islip and add 737 to Tampa. Does that mean it’s providing more value? No. There’s a good chance that those on the RJ experience much more pain than those on the 737 benefit from the move.

Brett – I guess all we’d say is that we’d like to see the market make that decision as best it can, in the context of the market’s already being distorted by slot controls. Reasonable people (we hope that includes us) can disagree. We’d merely like to see the issue discussed more thoroughly given the scarcity of such valuable assets.

At DCA and LGA, the RJs concern us far less than the hubbing. The latter are creatures of the 2011 slot swap between DL and US, and we are suspicious of the true motives. Typically, hubs sprouted up in places like ATL, DEN, DFW, IAH, PHX, etc. because they were unconstrained and a carrier (or carriers) was building a network strategy around them. It makes sense to fill in the local demand at such airports with connecting traffic, because there is no inherent tradeoff of local O&D traffic, and so the two traffic segments (local versus connecting) are symbiotic. The same cannot be said of DCA and LGA, at which those two segments are in competition with each other and, as such are involved in a zero-sum game.

CRW is losing 1 DCA and replacing it with 1 PHL (Old schedule crw-dca at 1300, returning dca-dca at 1500, new flight is crw-phl at 1300, returning phl-crw at 1525, also pushes current 1700 crw-dca to a 1740 crw-dca). I haven’t decided if this a good, bad or (most likely) neutral. Not entirely sure if any other cities had a similar swap.

I HATE this. I have limited vacation time and the direct flights to DesMoines worked perfectly for me to fly out late Thursday night and back early Tuesday morning so I only had to use two days of vacation (Friday and Monday) to go home for a long weekend to visit my family. Now I will not be able to go home as often due to the number of days I will have to take off to make it worthwhile. Me, the little guy, getting shafted again by the powers that be. VERY unhappy about this. Flights were always full when I was on them too.

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